Credit card surcharges

craoltoir

Included in an article in the Independent this morning (page 10) it is stated that banks can charge retailers a maximum of 0.03pc of the transaction cost on credit card payments. How can retailers (holiday companies, airlines etc.) charge the customer an extra 2-3% of the transaction value when a credit card is used? Can we expect retailers who currently have these charges to get rid of them or reduce them to the maximum level of 0.03pc?

salamanca22

craoltoir wrote: »

Included in an article in the Independent this morning (page 10) it is stated that banks can charge retailers a maximum of 0.03pc of the transaction cost on credit card payments. How can retailers (holiday companies, airlines etc.) charge the customer an extra 2-3% of the transaction value when a credit card is used? Can we expect retailers who currently have these charges to get rid of them or reduce them to the maximum level of 0.03pc?

As far as I know retailers are only allowed to charge as much as the transaction is costing them.

Nervous Wreck

salamanca22 wrote: »

As far as I know retailers are only allowed to charge as much as the transaction is costing them.

Technically, they can charge whatever they want as long as you agree (which you do by putting in your PIN) but, generally speaking, they charge whatever is on the price tag.

OP, same applies to your scenario. A retailer, for example, is well within their rights to say "since you're paying by Visa, we're gonna charge you loads extra" because you have the choice to not avail of their product/service. This has nothing to do with restrictions on what banks can charge retailers.

coylemj

craoltoir wrote: »

Included in an article in the Independent this morning (page 10) it is stated that banks can charge retailers a maximum of 0.03pc of the transaction cost on credit card payments.

That sounds like complete nonsense which would be par for the course for the Indo. If a corner store sells a packet of cigarettes for €10 and the punter pays with a credit card, do they seriously expect us to believe that the credit card company charge is only one third of a cent?

You said '0.03pc' which in decimal terms is 0.0003.

I was in a store downtown once buying a suit, the place pretty much specialised in selling suits with the odd shirt and tie thrown in but the bulk of his sales was gents' suits. I brought a bundle of cash with me to bargain for a decent discount but when I attempted to negotiate, he said that as his average sale was in the hundreds of euros, his CC charge was very low and because of that and for security reasons, he preferred plastic to cash.

The implication of what he said was that what the CC companies charged each retailer was down to the average transaction size meaning that a corner store would pay more than a filling station which in turn would pay more than a furniture store. I don't believe there is a flat (% of each transaction) charge across all retailers.

GerardKeating

craoltoir wrote: »

Included in an article in the Independent this morning (page 10) it is stated that banks can charge retailers a maximum of 0.03pc of the transaction cost on credit card payments. How can retailers (holiday companies, airlines etc.) charge the customer an extra 2-3% of the transaction value when a credit card is used? Can we expect retailers who currently have these charges to get rid of them or reduce them to the maximum level of 0.03pc?

Not true. Typical rates is about 1% for chip& pin transactions, twice that for mag swipe, but can be as high as 5% or more if the bank think it is a Risky business...

elastico

coylemj wrote: »

I was in a store downtown once buying a suit, the place pretty much specialised in selling suits with the odd shirt and tie thrown in but the bulk of his sales was gents' suits. I brought a bundle of cash with me to bargain for a decent discount but when I attempted to negotiate, he said that as his average sale was in the hundreds of euros, his CC charge was very low and because of that and for security reasons, he preferred plastic to cash.

The implication of what he said was that what the CC companies charged each retailer was down to the average transaction size meaning that a corner store would pay more than a filling station which in turn would pay more than a furniture store. I don't believe there is a flat (% of each transaction) charge across all retailers.

Bank of Ireland for example charge 0.48% fee to lodge cash. In additional to this the retailer needs to cover the cost of bringing the cash to the bank, security issues etc.

No major advantage in paying cash.

JTMan

craoltoir wrote: »

Included in an article in the Independent this morning (page 10) it is stated that banks can charge retailers a maximum of 0.03pc of the transaction cost on credit card payments. How can retailers (holiday companies, airlines etc.) charge the customer an extra 2-3% of the transaction value when a credit card is used? Can we expect retailers who currently have these charges to get rid of them or reduce them to the maximum level of 0.03pc?

The EC has introduced legislation to cap intercharge fees. Intercharge fees are what the banks charge retailers.

Ireland will inscribe the EC rules into law effective December 2015. From then, the credit card cap will be 0.3% of the transaction value. The debit card cap with be a weighted average of 0.1% of the transaction value.

These new charges do not apply till December 2015 and they are a big drop on the existing charges.

To put it in context, the average interchange fee in the USA is 2%, 0.1% - 0.3% is a tiny traction of this. From December, consumers should expect to see far less or no surcharges.

Yggr of Asgard

JTMan wrote: »

The EC has introduced legislation to cap intercharge fees. Intercharge fees are what the banks charge retailers.

Ireland will inscribe the EC rules into law effective December 2015. From then, the credit card cap will be 0.3% of the transaction value. The debit card cap with be a weighted average of 0.1% of the transaction value.

These new charges do not apply till December 2015 and they are a big drop on the existing charges.

To put it in context, the average interchange fee in the USA is 2%, 0.1% - 0.3% is a tiny traction of this. From December, consumers should expect to see far less or no surcharges.

I don't think you are correct there.

The EU has capped the intercharge fee, which is what the kickback that an acquirer (i.e the company that processes the credit card charge for the retailer) is paying the bank that has issued the credit card.

It's not a limit on what the acquirer can charge the retailer. The retailer still get's charged higher amounts.

The problem with the new limit is that banks used the kickback to for example offer miles for transactions, lower APR's or services. With it being limited now most those offers are dying out.

In addition this is for consumer cards only, the kickback for company cards is not limited.

I don't think that this will lead to lower charges for consumer, it will only lead to less service and higher cost for credit cards.